The 9th U.S. Circuit Court of Appeals, based in San Francisco, upheld a previous ruling by a lower court judge. The appellate panel, comprising three judges, unanimously agreed that the lower court had correctly applied the relevant legal standards. Furthermore, they concluded that the FTC had failed to adequately demonstrate a likelihood of success in its argument that the merger would stifle competition within the gaming market.
A spokesperson for the FTC declined to offer any immediate comments on the court's decision. Similarly, Microsoft had not yet responded to requests for their reaction at the time of the ruling.
This decision stems from an antitrust lawsuit initiated by the Federal Trade Commission in 2022 against Microsoft, the maker of the Xbox gaming console. The FTC, the primary body responsible for enforcing antitrust laws in the United States, had separately launched an internal administrative challenge against the merger. However, this administrative proceeding was put on hold in 2023 under President Joe Biden's administration, pending the outcome of the 9th Circuit's review.
The acquisition of Activision Blizzard stands as the largest transaction ever witnessed in the video gaming industry. The deal successfully closed in late 2023 after receiving the green light from competition authorities in the United Kingdom. The purchase had also undergone intense regulatory scrutiny in various other international markets.
The FTC's legal action sought a court order to freeze the Activision transaction while the agency pursued its parallel administrative challenge. The core argument put forth by the FTC was that the consolidation of Microsoft and Activision would create an environment where the merged entity could unfairly disadvantage competitors in the Xbox console market, as well as in the burgeoning subscription and cloud-based gaming sectors.
However, U.S. District Judge Jacqueline Scott Corley had previously denied the FTC's request to block the acquisition in July 2023. Judge Corley concluded that the FTC had not presented sufficient evidence to demonstrate that Microsoft's ownership of Activision would "substantially lessen competition in the video game library subscription and cloud gaming markets."
In its appeal to the 9th Circuit, the FTC contended that the lower court had employed an excessively stringent standard in its evaluation of whether to grant a preliminary injunction. Despite this argument, the appellate court ultimately sided with the initial ruling, delivering a significant blow to the FTC's efforts to unwind the already completed acquisition. This decision suggests a considerable hurdle for any potential future attempts by the FTC to challenge the merger through its remaining administrative avenue.